Königswinter, Germany (AP)—Last summer, Treasury Secretary Janet Yellen marked a “historic day” when more than 100 countries agreed to a global minimum tax treaty aimed at putting the world on a fairer footing. . President Joe Biden tweeted that the idea is “diplomacy that shapes our global economy and benefits our people.”
But this week, when Yellen joined the G7 finance ministers for meetings in Germany, she found herself insisting that hopes of advancing her historic tax plan were “not hopeless”.
The plan faces new resistance abroad and old divisions at home as it focuses on new global issues.
The ongoing war in Ukraine, the growing food security threat, crushing inflation and other important issues have diverted the attention of finance ministers from the adoption of the 2023 plan. To add to the pressure, Poland strengthened its opposition by vetoing at a meeting of European Union finance ministers in Brussels in April. Republicans in Congress are also resisting.
On Friday, the G7 finance ministers concluded their two-day meeting with a joint statement particularly notable for the $19.8 billion economic aid commitments announced to Ukraine. He spoke only briefly about the idea of the tax, saying that the ministers reaffirmed the “strong political commitment to the timely and effective implementation” of the plan to “make new rules at the global level”.
Overall, the global minimum tax treaty is designed to tax large multinational companies at a tax rate of 15 percent wherever they operate. The agreement also provides for the taxation of some of the profits of the world’s largest companies in countries where they do business online but may not have physical presence.
This should stop international careers under corporate tax that force multinational companies to file their profits in countries with low tax rates. This allows them to avoid taxes and encourages countries to lower rates to attract companies.
The G-7 website calls it “a real revolution in international tax law.” French Finance Minister Bruno Le Maire described the agreement as “the most important international tax treaty of the century”.
But Poland is expressing renewed concern about how the plan will be implemented, and the G-7 meetings do not seem to have helped break the stalemate. EU rules require the union of member states to change laws regarding taxes.
Christian Lindner, Germany’s finance minister, said at the end of the G7 ministerial meeting that “all technical concerns have been removed, so there are no technical concerns other than purely political”.
A spokesperson for the Polish Ministry of Finance expressed concern about “decreasing EU competitiveness and placing additional burdens on European businesses” without proper taxation of digital giants. They added that fears increase, especially when faced with the challenges of the post-pandemic era.
Yellen, who made the tax deal one of her top priorities as finance minister, began her European visit this week when she stopped in Poland, in part urging Polish leaders to rethink their positions.
“We are working on resolving their issues,” he told reporters on Thursday. We want Poland to join us. I don’t think it’s hopeless.”
So far, 137 countries, representing about 95 percent of the world’s total product, said they have agreed on a plan to “ensure companies equally share the burden of government financing.”
But Yellen is also facing headwinds in her own home from Republicans in Congress, who have shown little interest in the United States’ survival to the end of the deal. They said the plan would make the United States less competitive in the global economy.
Senator Mike Crapo of Idaho, prominent Republican on the Senate Finance Committee and Rep. Kevin Brady of Texas, a leading Republican on the House Ways and Means Committee, pointed to Poland’s opposition in a joint statement last month.
“If the EU is already facing hurdles, no one should expect countries like China to implement this agreement any time soon,” they said.
C. Eugene Steuerle, a member of the Urban Institute and co-founder of the Urban-Brookings Center for Tax Policy in Washington, said the deal might not be so lucky because it was made during a time of political instability.
“What makes it difficult these days is that the two sides are so divided,” he said. “This is what threatens this legislation more than an idea that I think has traditionally had support, or even some support, from both sides of the aisle.”
There are also a number of other global issues to watch out for.
“Governments have a certain amount of bandwidth—current events need to push some of these a little further down the list,” said David Feldman, professor of economics at the College of William and Mary in Virginia.
Mark Goldwein, senior policy director for the Special Committee on the Responsible Federal Budget, said the overall message of the tax plan was not “to be punitive” but “to increase revenue for all countries”.
We hope this will prevent countries from lowering their taxes compared to other countries,” he said.
Since the mid-1960s, U.S. corporate tax payments have fallen from 3.9 percent in 1965 to 1 percent of GDP in 2020, relative to the size of the economy, according to the Congressional Research Service.
This article makes a fitting reference to the statement of the Polish Ministry of Finance, which mistakenly named Wydzial Prasowy, the press department of the Ministry, as the official representative.
Source: Breitbart
